As an investor and commercial agent specializing in multi-family properties (and office leasing), I’m often asked why I’m so passionate about the multi-family asset type. I usually respond that I love multi-family properties because they can get you where you want to go in the shortest amount of time.
Investing in multi-family properties can be one of the fastest paths to financial independence. Just one property can exponentially explode your wealth.
Today’s current market conditions offer unprecedented opportunities for the savvy investor.
Here are my top 10 reasons to love multi-family investments:
# 1. It is an income-producing asset. My favorite part. Multi-family properties generate income! And it can produce significant passive income for you each and every month! No more worrying about where your income will come from if you’re suddenly laid off from your job.
# 2. Property pays its own expenses. Multi-family investments normally pay its own expenses. This means that all expenses generated by the property such as mortgage, taxes, utilities, payroll, advertising, landscaping, etc. is all paid out of the income that the property generates on its own. Not your pocket.
# 3. Does not have to be 100% occupied to generate a sizable income. If you own a single family property and your resident moves out, you have lost your income and are now stuck with paying the mortgage and other property expenses until you can get another renter, (which can take months). In a multi-family property, several residents can move out and you’ll still have money to pay expenses and still cash flow. Multiple tenants and multiple revenue streams decreases your risk
# 4. Efficiencies. Most management companies know that a 10 unit complex is much easier to manage than 10 single family homes spread out all over town. Not only will you get better pricing from them, you will also get better pricing from contractors when they know you have multiple units.
# 5. Value. The property’s value is derived from a multiple of the net operating income (gross income – expenses) and not by what income other multi-family properties are generating. This means that value is easily created by increasing income and/or decreasing expenses.
# 6. High Returns. – 20% and higher returns on cash invested are not uncommon! Contrast that with the 1.25% that savings accounts offer and 2% average rate for 2 year bank cd’s and it’s obvious to the savvy investor why this asset can offer you much better returns.
# 7. Not just rental income. Rental income is not the only income stream you can create with multi-family properties. There is also what’s called “ancillary” income. This is additional income the property can generate in the form of leasing fees, vending machine fees, faxing fees, laundry services fees, fees paid to you by companies that wish to provide services to your residents, and on and on.
# 8. Lender friendly. It’s easier to get a loan on a multi-family property than on other non-income producing real estate asset types. Lenders often qualify these types of loans based on the properties ability to repay the debt itself and not necessarily your own personal credit and repayment history. Also a lender approval usually means that the numbers on the property work well for all.
# 9. Leverage. Investors can use a small amount of equity on an existing property to acquire more properties with fewer funds and grow their portfolio (and returns) faster.
# 10. Taxes. One year I got a $15,000 refund due to property repairs that the property paid for! Keep more personal income in your pocket through allowable deductions and depreciation.
In summary, when chosen wisely multi-family investments can add significant wealth to your investment portfolio. Today’s market is offering unprecedented opportunities in this asset type. Don’t miss out!